The importance of Risk Management under AIFMD. Nordic Capital Markets Forum

Transcription

1 The importance of Risk Management under AIFMD Nordic Capital Markets Forum Marc Van de Gucht 7 May 2015

2 Back to. Risk Management under AIFMD 2

3 Back to The past: Birth of Risk Management (50ies) Evolution: 70ies -> 90ies Today: Key function under AIFMD (next to asset management) ASSET MANAGEMENT RISK MANAGEMENT Risk Management under AIFMD 3

4 Risk Management under AIFM Permanent risk management function Independent Remuneration policy Delegation? Governance... Risk Management under AIFMD 4

5 Governance Establish a permanent risk management function -> necessary authority and access to all relevant information? Functionally and hierarchically separate= Not be supervised by those responsable for operating units Not engaged in performance of activities within operating units Risk Management under AIFMD 5

6 Governance Functionally and hierarchically separate (ctd)= Compensated in accordance with achievement of objectives linked to function, independently of the performance of the operating units & AIFs. Remuneration directly overseen by the remuneration committee Delegation (Art 20 AIFMD): yes or no? Conditions. Concept of letter-box entity Risk Management under AIFMD 6

7 Risk Management under AIFM Permanent risk management function Independent Remuneration policy Delegation? Risk Management policy Definition and implementation of quantitative and qualitative risk limits Governance Risk Policy & Limits Risk Management under AIFMD 7

8 Risk Policy Appropriately documented risk management policy needed which identifies, measures, manages and monitors all relevant risks Annual review needed, also when material changes have been made + when internal or external events indicate an additional review is required Notification to relevant authority! Risk Management under AIFMD 8

9 Risk Policy Risk Management under AIFMD 9

10 Risk Limits Establish and implement quantitative and/or qualitative risk limits for each AIF For each AIF the need to cover at least: Market risk Credit risk Liquidity risk Counterparty risk Operational risk Should take into account the strategies and assets employed + any rules applicable to AIF. Alignment with those approved by governing body + those disclosed to investors Risk Management under AIFMD 10

11 Risk Limits Risk Management under AIFMD 11

12 Risk Management under AIFM Permanent risk management function Independent Remuneration policy Delegation? Risk Management policy Definition and implementation of quantitative and qualitative risk limits Governance Policy & Limits Measurement & Management Implementation to identify, monitor and manage Ensure compliance with risk limits Stress tests and back tests to assess adequacy -> corrective actions if needed Risk Management under AIFMD 12

13 Measurement & management Adopt adequate and effective arrangements, processes and techniques that uses sound and reliable data to identify, measure, manage and monitor at any given time the risks to which an AIF is or might be exposed to and their contribution to the overall risk profile Esure the level of risk complies with the risk limits Risk Management under AIFMD 13

14 Measurement & management Back testing, stress stesting and scenario analysis Establish, implement and maintain adequate procedures that result in timely remedial action should a breach occur Risk Management under AIFMD 14

15 Risk Management under AIFM Permanent risk management function Independent Remuneration policy Delegation? Risk Management policy Definition and implementation of quantitative and qualitative risk limits Governance Policy Internal External Risk Reporting Measurement & management Implementation to identify, monitor and manage Ensure compliance with risk limits Stress tests and back tests to assess adequacy -> corrective actions if needed Risk Management under AIFMD 15

16 Risk Reporting Internal Reporting to board members External Reporting to regulator: art. 110 & 111 of AIFMD-CDR: content, format and frequency Annex IV reporting templates cf. ESMA report Risk Management under AIFMD 16

17 External (ctd): Reporting to investors: Disclosure of the risk profile of the AIF (Art 108 (4) AIFMD-CDR) Information on the risk management systems (Art 108 (5) AIFMD-CDR) Information on arrangements for liquidity management (Art 108 (2 & 3) AIFMD-CDR) Risk Reporting Information on leverage (Art 109 (2 & 3) AIFMD-CDR) Risk Management under AIFMD 17

18 Risk Management under AIFMD 18

19 Risk Management under AIFMD 19

20 . The future? Risk Management under AIFMD 20

21 the future? Some personal considerations Risk Management under AIFMD 21

22 Thank you for your attention! Marc Van de Gucht Advisor Coordinator Tel: +32/2/ Name of Presentation 22